Category Archives: Export Control Reform

Export Compliance Updates: DECCS, Electronic Waste, and Wassenaar

Be the First to Test On-Line Advisory Opinion & Registration Applications!

DDTC is requesting industry testing of future Advisory Opinion and Registration applications in the Defense Export Control and Compliance System (DECCS).  See the DDTC News & Events page (10/15/2018 & 10/30/2018) for more information.  Testing is expected to continue through mid-November.

Comment on Prior Approval Requests for Brokering

On October 16, the Department of State, Directorate of Defense Trade Controls (DDTC) published a notice (83 FR 52298) requesting comments on Brokering Prior Approval requests.

As described in the notice:

Currently submissions are made via hardcopy documentation. Applicants are referred to ITAR part 129 for guidance on information to submit regarding proposed brokering activity. Upon implementation of DDTC’s new case management system, the Defense Export Control and Compliance System (DECCS), a DS-4294 may be submitted electronically.

Comments may be submitted until December 17, 2018.  Please see the Federal Register Notice for additional details.

And the New Year Will Bring:

  • Movement on USML Categories I-III – see our previous blog posts on the proposed changes to firearms, guns, and ammunition;
  • Revisions to ITAR Exemption 126.4(a) – Shipments by or for U.S. Government agencies;
  • DECCS testing of the DSP-85 – classified hardware & technical data; and
  • Reorganization of the sections of the ITAR.

Commerce Requests Comments on Electronic Waste

On October 23, 2018, the Department of Commerce published a notice (83 FR 53411) requesting public comments on potential export controls on electronic waste.  This request is based on concerns that “counterfeit goods that may enter the United States’ military and civilian electronics supply chain” resulting from unregulated overseas recycling of discarded electronic equipment.  See the Federal Register Notice for additional background, potential definitions, and potential regulatory requirements and exemptions.  Comments may be submitted through December 24, 2018.

Commerce Revises CCL to Reflect Wassenaar Plenary

On October 24, 2018, the Department of Commerce published rule (83 FR 53742) which amends the Commerce Control List (CCL) to reflect changes made to the Wassenaar Arrangement List of Dual-Use Goods and Technologies at the December 2017 Plenary meeting.

The rule revises 50 Export Control Classification Numbers (ECCNs): 0A617, 0A919, 1A002, 1C001, 1C002, 1C007, 1C010, 1C608, 2A001, 2B001, 2B006, 2B007, 2B008, 2E003, 3A001, 3A002, 3B001, 3B002, 3C002, 3C005, 3C006, 3C992, 3E001, 4A003, 4A004, 4D001, 4E001, 5A001, 5A002, 5D002, 5E002, 6A002, 6A003, 6A004, 6A005, 6A008, 6A203, 6D003, 6D991, 6E001, 6E002, 6E201, 7A006, 7E004, 9A002, 9A004, 9D001, 9D002, 9D004, and 9E003.  It also removes ECCNs 6A990 and 6E990, corrects 3A991, and makes other changes to ECCNs 2B206 and 3A001.i.  Furthermore, the rule moves 37 definitions from Part 772 to the relevant ECCNs and makes changes throughout the Export Administration Regulations (EAR) to reference the revised ECCNs.

A follow-up notice was published on November 2, 2018 (83 FR 55099) to correct an omitted reference to the Civil end-users (CIV) exception for some 3A001 items.

Export compliance is always changing.  Subscribe to Our “EAR”… to the ITAR to keep up!

State Department Tweaks ITAR, Requests Comments

On October 4, the Department of State, Directorate of Defense Trade Controls (DDTC) published a notice (83 FR 50003) that made several immediate, but minor, changes to the International Traffic in Arms Regulations (ITAR) and United States Munitions List (USML).  The revisions are in response to a July 2017 request for comments implementing the President’s Executive Order 13771, “Reducing Regulation and Controlling Regulatory Costs” and other industry feedback.

Other than USML revisions and notes, the only ITAR change was the removal of the requirement to return expired or exhausted licenses for technical data under 123.22(b)(3)(i) and (c)(2).

The USML revisions are as follows:

  • A note to USML Category IV(d) clarifies that it does not control satellite and spacecraft thrusters (instead, refer to XV(e)(12) and ECCN 9A515).
  • A note to USML Category V clarifies that, except for materials in V(c)(6), (h) or (i), the Department of Commerce licenses materials when incorporated into an item classified under ECCN 1C608 (“Energetic materials and related commodities”).
  • VIII(h)(12) – The description of UAV flight control systems is revised so that collision avoidance alone does not lead to ITAR controls:

(12) Unmanned aerial vehicle (UAV) flight control systems and vehicle management systems with swarming capability (i.e. UAVs that operate autonomously (without human input) to interact with each other to avoid collisions and stay together, fly in formations, and are capable of adapting in real-time to changes in operational/threat environment, or, if weaponized, coordinate targeting) (MT if for an aircraft, excluding manned aircraft, or missile that has a ‘‘range’’ equal to or greater than 300 km);

  • Notes to XI(a)(3)(i) and (xii) add additional technical specifications and a reference to Commodity Jurisdiction determinations to avoid control of airborne radars used by commercial drones.
  • Revisions to XI(c)(4) implement power thresholds to exclude components necessary for 5G wireless technology, including four required criteria and eight explanatory notes.
  • XV(f) is revised to include “to a foreign person” in its definition of satellite and spacecraft defense services.

DDTC also noted that it is working on a possible temporary export exemption for repair/replacement by foreign Original Equipment Manufacturer (OEM) as well as revised definitions proposed in 2015 (80 FR 31525) that were not included in the 2016 interim final rule (81 FR 35611) or final rule (81 FR 62004).

The Federal Register Notice includes additional background and responses to comments that may be of interest.  While these changes are effective immediately, comments may be submitted until November 19, 2018.

In separate notices, DDTC has also requested comments on three existing information collections for Office of Management and Budget (OMB) approval.  Click on the Federal Register Notices for more information and docket and control numbers needed for comments:

  • §123.9 Request to Change End-User, End-Use and/or Destination of Hardware (83 FR 47235).  The notice acknowledges that DDTC is working on a DS-6004 form to be submitted through the Defense Export Control and Compliance System (DECCS).  Comments will be accepted up to November 19, 2018.
  • Part 129 Annual Brokering Reports (83 FR 47390). Comments will be accepted up to November 19, 2018.
  • DS-2032 Statement of Registration (83 FR 48496).  Comments will be accepted up to November 26, 2018.

As always, these are important opportunities to comment on how your business views and is affected by export regulations.

Submit Your Comments for Categories I-III to State & Commerce Today

Updating on our previous post on the proposed revisions to USML Categories I, II, and III, the proposed rules to transfer articles from the firearms, artillery, and ammunition categories from State Department to Commerce Department jurisdiction have been published.

The proposed rules were officially published in the Federal Register on May 24, 2018 at 83 FR 24166 (Commerce Department) and 83 FR 24198 (State Department).  Comments will be accepted under both notices until July 9, 2018.

USML Categories I, II, and III Proposed for Reform!

Nearly two years after Export Control Reform stalled without reaching the remaining three categories, the Departments of State and Commerce have simultaneously published proposals to revise United States Munitions List (USML) Categories I, II, and III (firearms, artillery, and ammunition).  Click here for the Department of State proposal and click here for the Department of Commerce proposal.

The rationale for the review is that:

The Department of State is engaged in an effort to revise the U.S. Munitions List so that its scope is limited to those defense articles that provide the United States with a critical military or intelligence advantage or, in the case of weapons, are inherently for military end use. The articles now controlled by USML Categories I, II, and III that would be removed from the USML under this proposed rule do not meet this standard, including many items which are widely available in retail outlets in the United States and abroad.

Currently written broadly, USML Categories I, II, and III cover most firearms, artillery systems, and ammunition.  They also include catch-all parts and components categories (e.g., I(h) “Components, parts, accessories and attachments for the articles in paragraphs (a) through (g) of this category.”).  Items no longer controlled under the USML would be controlled by the Department of Commerce’s Export Administration Regulations (EAR) and listed on the Commerce Control List (CCL).

The eagerly-awaited USML Category I revision would include the following, notably excluding most “non-automatic or semi-automatic firearms”:

  1. Firearms using caseless ammunition.
  2. Fully automatic firearms to .50 caliber (12.7 mm) inclusive.
  3. Firearms specially designed to integrate fire control, automatic tracking, or automatic firing (e.g., Precision Guided Firearms (PGFs)), and specially designed parts and components therefor.
    Note to paragraph (c): Integration does not include only attaching to the firearm or rail.
  4. Fully automatic shotguns regardless of gauge.
  5. Silencers, mufflers, and sound suppressors, and specially designed parts and components therefor
  6. [Reserved]
  7. Barrels, receivers (frames), bolts, bolt carriers, slides, or sears specially designed for the articles in paragraphs (a), (b), and (d) of this category.
  8. Parts, components, accessories, and attachments, as follows:
    1. Drum and other magazines for firearms to .50 caliber (12.7 mm) inclusive with a capacity greater than 50 rounds, regardless of jurisdiction of the firearm, and specially designed parts and components therefor;
    2. Parts and components specially designed for conversion of a semiautomatic firearm to a fully automatic firearm.
    3. Accessories or attachments specially designed to automatically stabilize aim (other than gun rests) or for automatic targeting, and specially designed parts and components therefor.
  9. Technical data (see §120.10 of this subchapter) and defense services (see §120.9 of this subchapter) directly related to the defense articles described in paragraphs (a), (b), (d), (e), (g), and (h) of this category and classified technical data directly related to items controlled in ECCNs 0A501, 0B501,0D501, and 0E501 and defense services using the classified technical data. (See §125.4 of this subchapter for exemptions.)

x.  Commodities, software, and technology subject to the EAR (see §120.42 of this subchapter) used in or with defense articles. Note to paragraph (x): Use of this paragraph is limited to license applications for defense articles where the purchase documentation includes commodities, software, or technology subject to the EAR (see §123.1(b) of this subchapter)

Note 1 to Category I: Paragraphs (a), (b), (d), (e), (g), (h), and (i) of this category exclude: any non-automatic or semi-automatic firearms to .50 caliber (12.7 mm) inclusive; non-automatic shotguns; BB, pellet, and muzzle loading (e.g., black powder) firearms; and parts, components, accessories, and attachments of firearms and shotguns in paragraphs (a), (b), (d), and (g) of this category that are common to non-automatic firearms and shotguns. The Department of Commerce regulates the export of such items…

The proposed Category II revision includes expanded technical notes and specifications for control and enumerate the parts and components that will remain on the USML.  The proposed Category III is rewritten to control ammunition based on technical attributes rather than merely being “for the articles in Categories I and II.”  Both Category I and Category II will include paragraphs controlling developmental products funded by the Department of Defense.

Other sections of the International Traffic in Arms Regulations (ITAR) would be amended due to existing references to “firearms” that would be overbroad with a revised Category I.  These include the firearms exemptions in §123.17, which would no longer be subject to the ITAR.

Concurrently, the Department of Commerce would create new Export Control Classification Numbers (ECCNs) for the items leaving the USML.  Items currently controlled in Category II would be controlled under new “600 series” ECCNs “to control items of a military nature” and Category I and III items would be controlled under new “500 series” ECCNs “because, for the most part, they have civil, recreational, law enforcement, or other nonmilitary applications.”  Conforming to the new ECCNs, seven existing ECCNs would be revised and nine removed.  Various other changes would be made throughout the EAR.

Notably, from the Department of Commerce proposal:

This proposed rule does not deregulate the transferred items. BIS would require licenses to export, or reexport to any country a firearm or other weapon currently on the USML that would be added to the CCL by this proposed rule. BIS would also require licenses for the export or reexport of guns and armament that would be controlled under new ECCN 0A602, such as guns and armaments manufactured between 1890 and 1919 to all destinations except Canada. As compared to decontrolling firearms and other items, in publishing this proposed rule, BIS, working with the Departments of Defense and State, is trying to reduce the procedural burdens and costs of export compliance on the U.S. firearms industry while allowing the U.S. Government to enforce export controls for firearms appropriately and to make better use of its export control resources.

Comments on the proposed revisions may be submitted to the Department of State until 45 days after the publication of the Federal Register Notice—likely June 30, 2018 or later.  Comments are specifically requested regarding any possible gaps in control between the revised USML and CCL, items whose jurisdiction is unclear under the revision, the time needed for industry to implement any final rule, and any other regulatory burden.  Comments may be submitted via the Federal eRulemaking Portal at http://www.regulations.gov under Docket DOS-2017-0046 or by email to DDTCPublicComments@state.gov with the subject line, “ITAR Amendment – Categories I, II, and III.”

Comments may be submitted to the Department of Commerce on the same timeline via the Federal eRulemaking Portal at http://www.regulations.gov under Docket BIS-2017-0004 or by mail, referencing RIN 0694-AF47 to:

Regulatory Policy Division
Bureau of Industry and Security
U.S. Department of Commerce
Room 2099B
14th Street and Pennsylvania Avenue, NW
Washington, DC 20230

 

Update, May 25, 2018

The proposed rules were officially published in the Federal Register on May 24, 2018 at 83 FR 24166 (Commerce Department) and 83 FR 24198 (State Department).  Comments will be accepted until July 9, 2018.

Leveling the Playing Field—We Now Have a New Conventional Arms Transfer (CAT) Policy

On April 19, 2018, the White House released a new Conventional Arms Transfer Policy (CAT).  This is a high level policy which directs the Departments of State, Defense, Commerce, and Energy to coordinate on the policy considerations for arms transfers.  Replacing the 2014 Conventional Arms Transfer Policy, it adds “Economic Security” to the list of factors used in evaluating proposed armed transfers, retaining the factors of national security, relationships with allies and partners, and nonproliferation.  “Economic Security” includes the effect of a proposed transfer on the defense industrial base and the availability of comparable foreign systems.

The State Department’s Directorate of Defense Trade Controls (DDTC) has posted a statement on the new CAT policy which includes some useful examples:

Specifically, we will increase opportunities for pre-deployment training and simulations of complex operational environments to help partners avoid civilian casualties. We will also encourage acquisitions of U.S. technology and training to enable more accurate battlespace awareness and more accurate targeting. We will also continue training to assist security forces in carrying out operations in a manner that respects human rights.

DDTC welcomes submission of stakeholder comments to ArmsTransferProcess@state.gov.

It remains to be seen what effect these changes will have on particular license applications, but the consideration of foreign availability is one of the major factors driving the simultaneous reevaluation of unmanned aerial systems (UAS) policy.

The State Department released a fact sheet on the new UAS export policy which seeks to increase trade opportunities for U.S. companies, enhance partner security and counterterrorism capabilities, and strengthen bilateral relationships while preserving U.S. military advantage and preventing the weapons of mass destruction delivery system proliferation.  UAS transfers remain subject to the Missile Technology Control Regime (MTCR).

For additional background on the Conventional Arms Transfer and UAS policies from Peter Navarro, Assistant to the President and Director of the Office of Trade and Manufacturing Policy, click here.

Finally, DDTC has announced the launch of a redesigned website effective April 30, 2018, intending “a number of significant enhancements including improved navigation, searchability, and accessibility, with a consistent, full-featured experience across mobile devices.”  The redesign has changed many links, so bookmarks and other saved references may need to be updated.

State and Commerce Departments Request Comments on USML Categories V, X, and XI and Related ECCNs

State Department Request for Comments

On February 2, the Department of State published a notice (83 FR 5970) seeking comments on the following topics as they relate to U.S. Munitions List (USML) Categories V (Explosives and Energetic Materials, Propellants, Incendiary Agents, and Their Constituents), X (Personal Protective Equipment), and XI (Military Electronics).  Specifically, the notice requests comments on the following issues:

  1. Emerging and new technologies that are appropriately controlled by one of the referenced categories, but which are not currently described in subject categories or not described with sufficient clarity.
  1. Defense articles that are described in subject categories, but which have entered into normal commercial use since the most recent revisions to the category at issue. For such comments, be sure to include documentation to support claims that defense articles have entered into normal commercial use.
  1. Defense articles for which commercial use is proposed, intended, or anticipated in the next 5 years.
  1. Drafting or other technical issues in the text of all of the referenced categories.
  1. Comments regarding USML Category XI paragraph (b) modification.
  1. Potential cost savings to private entities from shifting control of specific commercial items from USML to the Export Administration Regulations. To the extent possible, please quantify the cost of compliance with USML control of commercial items, to include the time saved, the reduction in paperwork, and any other cost savings for a particular change.

Comments may be submitted by internet at www.regulations.gov (Docket No. DOS–2017–0017) or by email to DDTCPublicComments@ state.gov through April 13, 2018.  Comments will be published and should not include proprietary or other sensitive information.

For the current USML categories, click here.

Commerce Department Request for Comments

In a related notice (83 FR 5968), the Department of Commerce requests comments on the following Commerce Control List (CCL) ECCNs (Export Control Classification Numbers): energetic materials (1B608, 1C608, 1D608 and 1E608); armored and protective equipment (1A613, 1B613, 1D613, 1E613); military electronics (3A611, 3B611, 3D611 and 3E611); and cryogenic and superconducting equipment (9A620, 9B620, 9D620 and 9E620).  Specifically, the notice requests comments on the efficacy of the previous revisions, how to improve the implementation of these 600 series items on the CCL, and the potential cost savings of shifting control of these specific items from the USML to the CCL.

Comments may be submitted by internet at www.regulations.gov (Docket No BIS–2018–0004) through April 13, 2018.  Comments will be published and should not include proprietary or other sensitive information.

For the current CCL categories click here.

State Department Discontinues DSP-119, Other Forms in Development

The State Department’s Directorate of Defense Trade Controls (DDTC) has published a web notice discontinuing acceptance of the DSP-119 (Application for Amendment to License for Export or Temporary Import of Classified or Unclassified Defense Articles and Related Classified Technical Data):

Web Notice: Discontinuance of ELLIE and form DSP-119: (11.14.17)
Effective December 1, 2017, DDTC will no longer accept form DSP-119 to amend the DSP-85. All pending DSP-119’s will be processed pursuant to 123.25 of the ITAR. Any DSP-119 form submitted to DDTC on or after December 1, 2017 will be returned without action. When amending the DSP-85, the applicant must submit a completely new DSP-85 along with a transmittal letter, signed by the Empowered Official explaining the amended change.

Previously an all-purpose amendment form, the DSP-119 is currently only accepted to amend the DSP-85 Application for Permanent/Temporary Export or Temporary Import of Classified Defense Articles and Related Classified Technical Data.  Unclassified licenses are unaffected and may continue to be amended with the appropriate form (DSP-6, DSP-62, or DSP-74).

DDTC continues to work on expanding online DECCS (Defense Export Control and Compliance System) forms which are submitted through an interactive, browser-based form.  DECCS currently supports the submission of Commodity Jurisdiction (CJ) requests, which should be joined in the near future Advisory Opinion and Disclosure forms.  (Note also that DDTC currently recommends submitting a DSP-5 technical data export license in lieu of a General Correspondence Advisory Opinion when possible.)

DECCS forms for registration renewal and update as well as the single licensing form are also in development.

One-form electronic filing, proposed revisions of the definitions of defense services and manufacturing, and rules regarding release of technical data to foreign dual-nationals will be discussed at the next Defense Trade Advisory Group (DTAG) meeting scheduled for February 1, 2018 (originally December 7, 2017, but rescheduled in a November 20th Federal Register Notice).  To attend the DTAG meeting, please note the instructions at the end of the notice.

State Department Requires Form DSP-83 for Chemical Agent Resistant Coatings

The State Department’s Directorate of Defense Trade Controls (DDTC) has published a web notice on Chemical Agent Resistant Coatings (CARC):

Web Notice: Category XIV(f)(7), including Chemical Agent Resistant Coatings (CARC): (11.01.17)
Consistent with 81 FR 49531 (July 28, 2016), Category XIV(f)(7) defense articles are designated as Significant Military Equipment. Accordingly, any application to export Category XIV(f)(7) defense articles requires a DSP-83 non-transfer and use certificate.

The notice is consistent with the organization of the United States Munitions List (USML) where all of Category XIV(f) is designated Significant Military Equipment (SME), but reverses long-standing policies, including those announced in September 2009 and February 2017 web notices.

Specifically, XIV(f)(7) controls “Chemical Agent Resistant Coatings that have been qualified to military specifications (MIL-PRF-32348, MIL-DTL-64159, MIL-C-46168, or MIL-DTL-53039).”

A related Export Control Reform (ECR) FAQ continues to state that application of Chemical Agent Resistant Coatings (CARC) does not necessarily subject an item to the USML:

Q: Chemical Agent Resistant Coating (CARC) in its most basic form is controlled under USML Category XIV(f)(5). When it is applied to an item subject to either the ITAR or EAR, will the item to which it is being applied now be controlled as Category XIV(f)(5)? To the USML, at a minimum?

A: No. CARC coating on an item, in and of itself, does not provide a military capability warranting USML control. Hence, items that are subject to the EAR and classified on the Commerce Control List, to include vehicles and equipment, do not become subject to the ITAR simply due to the application of CARC paint.

The 2009 and 2017 web notices stated that “CARC paint does not possess ‘substantial military utility or capability,’” but ongoing Export Control Reform (ECR) revisions have not yet removed the SME designation from XIV(f)(7).

Export Control Reform Moving Along: A Report from DTAG

The Defense Trade Advisory Group (DTAG), an advisory group of defense trade representatives, held a public meeting this month to discuss policies, regulations, and technical issues in defense trade.  Here are some of the highlights:

  • Export Control Reform has driven a 55% reduction in licensing volume since 2013 for the State Department’s Directorate of Defense Trade Controls (DDTC).
  • DDTC is still working to move USML Categories I, II, & III (firearms, larger guns, and ammunition) to the CCL in the next year.  These categories currently represent around 30% of DDTC license applications, so the move would drive another significant reduction in their licensing volume.  One source of delay is Executive Order 13771, “Reducing Regulation and Controlling Regulatory Costs,” which directs agencies to repeal two existing regulations for each new significant regulation.  The new Commerce Department rules would be considered new regulations, requiring additional offsetting repeals of regulations.  The State Department operates under an exception for “regulations issued with respect to a military, national security, or foreign affairs function of the United States.”
  • The State Department will also consider revisions to the definition of defense services, U.S. persons abroad, and other definitions.
  • The State Department is considering whether UAVs should remain in Category I of the MTCR (Missile Technology Control Regime) Annex, as opposed to less-sensitive Category II, is also under review and will be discussed at the October MTCR plenary.
  • The State Department is working on revisions to the UK & Australia Treaty implementation regulations.  Both treaties have helped to decrease licensing volume, but improvements can be made.
  • An interagency group involving the Departments of State and Defense is working on a rewrite of the ITAR.  There has not been a wholesale rewrite of the ITAR since 1984.  Overall, they are seeking to restructure for gaps and inconsistencies, add definitions, shorten the ITAR where possible, consider incorporation of guidance documents, and lead to a format that is conducive to a single control list (an end goal of Export Control Reform).
  • In IT modernization, DDTC is currently on track for a December roll-out of a single case management system, to be followed by a single license form.

The DTAG is expected to meet again next spring.

State Department Amends Category XI(b) to Continue Current Text

The State Department’s Directorate of Defense Trade Controls (DDTC) published an amendment to USML Category XI(b) (82 FR 41172).  The amendment continues the current text as follows:

*(b) Electronic systems, equipment or software, not elsewhere enumerated in this subchapter, specially designed for intelligence purposes that collect, survey, monitor, or exploit, or analyze and produce information from, the electromagnetic spectrum (regardless of transmission medium), or for counteracting such activities.

This text was scheduled to be replaced on August 30, 2017, but with the amendment the replacement will be delayed until August 30, 2018.  At that time, unless otherwise amended, Category XI(b) will read:

*(b) Electronic systems or equipment, not elsewhere enumerated in this subchapter, specially designed for intelligence purposes that collect, survey, monitor, or exploit the electromagnetic spectrum (regardless of transmission medium), or for counteracting such activities.

The change now scheduled for 2018 removes “software” as well as the capability to analyze and produce information from the electromagnetic spectrum.

The current language is meant to maintain control of “certain intelligence-analytics software” until a long-term solution is developed.  The rule gives the government additional time “to review USML Category XI in full and publish proposed and final rules.”